Early rally evaporates as Italian gridlock looms

NEW YORK—Early signs that Italy could be headed for political gridlock following closely followed elections popped an early stock market rally in the U.S. and Europe.

Markets had started the day higher Monday on hopes that center-left group was gaining in the polls.

Later news that the camp of former premier Silvio Berlusconi could clinch control of Italy's upper house of Parliament got investors worried that the country could backtrack on its economic reform program.

The Dow Jones industrial average was down 65 points at 13,934 at midday, giving up an early gain of 81 points.

The Standard & Poor's 500 index was down seven at 1,508 and the Nasdaq was off six at 3,155.